Correlation Between Mistras and Avalon Holdings

Can any of the company-specific risk be diversified away by investing in both Mistras and Avalon Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Mistras and Avalon Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mistras Group and Avalon Holdings, you can compare the effects of market volatilities on Mistras and Avalon Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Mistras with a short position of Avalon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mistras and Avalon Holdings.

Diversification Opportunities for Mistras and Avalon Holdings

0.01

Correlation Coefficient

Mistras  Avalon Holdings

Significant diversification

The 3 months correlation between Mistras and Avalon is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Mistras Group and Avalon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalon Holdings and Mistras is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Mistras Group are associated (or correlated) with Avalon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalon Holdings has no effect on the direction of Mistras i.e., Mistras and Avalon Holdings go up and down completely randomly.

Pair Corralation between Mistras and Avalon Holdings

Allowing for the 90-day total investment horizon Mistras is expected to generate 1.18 times less return on investment than Avalon Holdings. But when comparing it to its historical volatility, Mistras Group is 2.21 times less risky than Avalon Holdings. It trades about 0.06 of its potential returns per unit of risk. Avalon Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  316.00  in Avalon Holdings on December 1, 2024 and sell it today you would earn a total of  11.00  from holding Avalon Holdings or generate 3.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Mistras Group  vs.  Avalon Holdings

Mistras Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mistras Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Mistras is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Avalon Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avalon Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Avalon Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mistras and Avalon Holdings

The main advantage of trading using opposite Mistras and Avalon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mistras position performs unexpectedly, Avalon Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Avalon Holdings will offset losses from the drop in Avalon Holdings' long position.

The idea behind Mistras Group and Avalon Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.